Brexit/Ireland: Schleswig-Holstein 2.0

The question of the Irish border poses the biggest threat to agreement being reached on post-Brexit EU/UK relations.

Economic imperatives…

“Britain, having unilaterally taken the customs union and single market off the table, before we move to phase two talks on trade we want taken off the table any suggestion that there will be a physical border, a hard border, new barriers to trade on the island of Ireland.”

Irish Prime Minister Leo Varadkar, 17 November 2017

There is a very old joke revolving around an Irishman who, when asked directions to Dublin, replies: “I wouldn’t start from here”. Much the same can be said, it seems, for the stance of Irish Taoiseach (Prime Minister) Leo Varadkar (pictured) on the post-Brexit nature of the Ireland/UK border. Clearly, the Republic of Ireland’s strong preference would be for the UK to remain in a customs union with the EU post-Brexit, if not the single market. But these are two options which, as Mr Varadkar has acknowledged, are completely off the table as far as the UK government is concerned.

[Note: BBC News, in a general guide to Brexit recently offered this useful explanation of the differences between the two, as follows:

“The customs union ensures EU member states all charge the same import duties to countries outside the EU. It allows member states to trade freely with each other, without burdensome customs checks at borders, but it limits their freedom to strike their own trade deals.It is different from a free trade area. In a free trade area no tariffs, taxes or quotas are charged on goods and services moving within the area but members are free to strike their own external trade deals. The single market is a very different beast - it is not just about the trade in goods. It allows the free movement of people, money and services as if the EU was a single country.”**]**

Although ties between the Republic of Ireland and Northern Ireland are the bigger stumbling block on the road to agreement at the 14/15 December EU summit to launch post-Brexit relationship negotiations, Dublin’s strong preference has wider roots in that, according to the Irish Exporters Association, two-thirds of exporters based in Ireland ship their goods to Europe and beyond via the ‘mainland’ UK. Thus, as Arthur Beesley wrote in the Financial Times (FT) recently (subscriber access only):

“Transiting through Britain allows companies to take advantage of short sea crossings from Ireland, extensive UK motorways and the Channel tunnel to France. Crucially, the absence of border checks saves trucks time at British ports.”

Furthermore, the UK as a whole is Ireland’s biggest market, worth around EUR65bn in 2015. For Ireland, therefore, the economic stakes are high — indeed higher, at least in relative terms, than for any other member of the EU27.

…versus political reality…

“Dublin…wants Britain to agree that there should be no divergence in regulations that would force the reimposition of a border across the growing ‘all-island’ economy.”

Arthur Beesley, Financial Times, 23 November 2017

The UK government has, in fact, published a paper on the issue of the border between the Republic of Ireland and Northern Ireland in which it makes clear that it does not want to see a ‘hard’ border, eg customs posts, there. However, critics claim (with justification, in my opinion) that the paper lacks credible detail — and not only as seen from Dublin and Brussels, where, as in Dublin, the border question also raises concerns over the future of the Good Friday Agreement.

The problem is that offering ‘credible detail’ which would satisfy Dublin — and, therefore, the EU27 (see below) — would, seemingly inevitably, drag the UK government into clear and binding commitments over regulatory mutual recognition between the Republic and the North and a consequent UK internal regulatory border which would, seemingly equally inevitably, pull Northern Ireland closer to the single market over time and, therefore, away from post-Brexit Britain.

[Note: For anyone not clear on the difference between the United Kingdom (UK) and Britain, the former is the commonly used abbreviation for ‘the United Kingdom of Great Britain and Ireland’; in other words, correctly defined, ’Britain’ does not include Northern Ireland. For a more detailed explanation please see here.]

The Northern Irish Democratic Unionist Party (DUP), which supported the UK’s withdrawal from the EU (against majority public opinion in Northern Ireland which voted 56-44% in favour of ‘remain’), is strongly opposed to any such arrangement. Critically, the minority Conservative government in Westminster is entirely dependent on the DUP’s votes (on a case-by-case basis) for its parliamentary majority. Furthermore, if push comes to shove, the DUP is likely to be able to garner support from the hardline Brexiteers in the UK cabinet, even though they are wary of openly splitting the Conservative Party to the extent that the government falls and there is another general election which could result in a Labour (or, more likely, Labour-led coalition) government.

[Note: In recent opinion polls, Labour has a 1-2% lead over the Conservatives on average, suggesting that an early election would result in a plurality (rather than a majority) for the former, which would likely then be in a strong position to form a new government which could conceivably if not reverse Brexit then opt for a future relationship with the EU based around either single market or customs union membership.]

Thus, the room for manoeuvre available to UK Prime Minister Theresa May is strictly limited.

…on both sides of the Irish Sea

“What will define [Mr Varadkar’s] premiership? At the top of the pile is Brexit in terms of what the government negotiates. This is so important for Ireland, getting a good outcome for him is absolutely critical.”

Brian Hayes MEP (quoted in the 23 November 2017 FT)

The same is true for Mr Varadkar back in Dublin, as the quote above from Brian Hayes (a strong supporter of the Taoiseach) makes clear. He too only commands a minority government and is therefore very vulnerable on the Irish border question. Furthermore, his government now looks to be under imminent threat from a completely unrelated controversy involving the Republic’s Tánaiste (Deputy Prime Minister) Frances Fitzgerald. At the time of writing this report, Mr Varadkar was engaged in talks with Micheál Martin, the leader of the Fianna Fáil party, on which his Fine Gael government is dependent, but is threatening to seek an early general election, possibly on 19 December, if there is no agreement by 28 November. This can certainly still be avoided, eg by Ms Fitzgerald’s resigning the deputy premiership, which would stave off the threat of a general election at least into next year. But even if it is, the domestic pressure on Mr Varadkar to come up with a good outcome for Ireland in the Brexit negotiations only eases slightly if at all.

The balance of power

“The EU27 must now be firm, particularly since the negotiations are stalled because the British have failed to provide specific answers on a number of points.”

France’s European Affairs Minister Natalie Loiseau (quoted in The Guardian of 17 November 2017)

Furthermore, Mr Varadkar can reasonably assume that Ireland can expect strong support from the EU27 for the time being; but that, once post-Brexit relationship negotiations are launched, support among the EU27 for further concessions from the UK on the Irish border question is likely to wane. Thus, wresting what he needs from London over the next two weeks or so and at the summit itself is absolutely critical from Dublin’s perspective. So, we may be sure that if he is not satisfied with what London comes up with between now and then Mr Varadkar will veto moving to post-Brexit relationship negotiations, as he has threatened; and almost as sure that it would not, in fact, be necessary for him to block in isolation — indeed, that both France and Germany for starters are likely to back Ireland.

If, as Mr Varadkar has again said he is prepared to, this delays consensus on moving to the next negotiating phase until 2018 it could even mean that there is no agreement to do so until the next set EU summit on 22/23 March, leaving just one year and one week before the set Brexit date of 29 March 2019. Confronted with such circumstances, business and investor sentiment vis à vis the UK, which currently seems to be based on expectations of agreement being reached in December, is likely to take an immediate and sharp downturn.

On the other hand, Mr Varadkar must also be well aware that (although economists inevitably differ in their assessment) a ‘hard’ Brexit would almost certainly be very bad news for the Irish economy. So, it is also not in Ireland’s interests to delay negotiations on the future relationship unduly.

Schleswig-Holstein 2.0?

“Only three people have ever really understood the Schleswig-Holstein business—the Prince Consort, who is dead — a German professor, who has gone mad — and I, who have forgotten all about it.”

Henry John Templeton, Third Viscount Palmerston (1784-1865)

To this day the mid-19th century ‘Schleswig-Holstein question’, revolving around the relationship between two duchies, Schleswig and Holstein, the Danish crown and the German confederation, remains an outstandingly complex historical reference point for European diplomats and students of international law. In would be entirely misleading to draw close comparisons between it and the current question of Brexit and the Irish border; but, with the two Irelands caught between Brussels and London, there do seem to me to be similarly demanding challenges to finding a solution which would be politically acceptable to all parties, and sustainable. In particular, with Dublin (not unreasonably) demanding clear and binding commitments from London, it is not at all certain that a classic EU ‘fudge’ will save the day.

Subject to Mrs May actually delivering as she has promised (on 4 December when she is due to meet the President of the European Commission, Jean-Claude Juncker?) on the vexed questions of the ‘Brexit bill’ and right of abode, this therefore stands to be the biggest barrier to moving to the next stage in the negotiations in early 2018, a step which is surely now all but essential if there is to be any chance of agreeing a new trade relationship between the EU and the UK before 29 March 2019.